BMI View: The immediate outlook for electricity generation is poor with the country in an official state of energy emergency. Fighting in the east of Ukraine has halted coal production in many mines andhasblocked transport lines to power stations. On the upside,BMIunderstands Ukraine has managed to make payments for gas in March and May 2015 and the negotiations for a long-term solution, mediated by theEU, are ongoing. Although Ukraine is increasing its generation of nuclear energy, we still forecast a decline in generation to 152.9TWh in 2015, down from 173.8TWh in 2013.

Longer term, both production and consumption will rise as the economy starts to recover and processes of integration with the EU bring about a partial liberalisation of the power sector and investment from abroad. This will create opportunities for investment in Ukraine's power sector. However, multiple barriers stand in the way of developing the sector, including corruption, vested interests and the fractious political environment, meaning that electricity production will fall far short of Ukraine's potential.

Key Trends And Developments

*The short-term outlook for Ukraine's coal-fired power sector is poor due to the ongoing conflict in Ukraine's main coal-producing regions in the east of the country. Around two-thirds of Ukraine's mines have ceased activity, forcing Ukraine to import coal to cover its needs.

* Gazprom received USD15mn as prepayment for March 2015 gas supplies. Ukraine made an upfront payment of USD30mn to Gazprom on May 13 to secure gas imports for the month, according to Naftogaz Ukrayiny. Naftogaz has wired a total of USD180mn for Russian gas supplies since the start of Q215, including the latest payment of USD30mn. Ukraine also managed to negotiate a discount on the natural gas supply until the end of Q215. However, a long-term agreement is yet to be reached. European Commission (EC) Vice-President Maros Sefcovic intends to close talks with Ukraine and...

The Ukraine Power Report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing national and multinational operators by sales, market share, investments, projects, partners and expansion strategies.

Key Benefits

Use BMI's independent industry forecasts for Ukraine to test other views - a key input for successful budgeting and strategic planning in the power market.

Target business opportunities and risks Ukraine's power sector through our reviews of latest power industry trends, regulatory changes, and major deals, projects and investments in Ukraine.

BMI’s Risk Reward Indices provide investors (power companies, service companies and equity investors) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors,

Market Overview

Structure, size and value of the industry sector; overview of the industry landscape and key players; an assessment of the business operating environment, sustainable energy policies, pricing and the latest regulatory developments.

Key Projects Database

Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by location, sector type, capacity, value, companies and operational status.

Competitive Landscape

Illustration of the power industry that exploits our data-rich, in-depth analysis of the leading players in the sector and examination of operational results, strategic goals, market position and the potential for investment.

Power Outlook long-Term Forecasts

Regional long-term power forecasts covering electricity generation, consumption and capacity for thermal, hydroelectric and nuclear power. These are supported by a country specific overview, alongside an analysis of key downside risks to the main forecasts.

Regional Overview

Providing BMI’s near-term economic outlook for the region as a whole, as well as taking a close look at countries of particular interest and the latest trends and developments.

Sources

The Power Market Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports, including Energy Information Administration (EIA), World Bank (WB) and United Nations (UN).

BMI View: The immediate outlook for electricity generation is poor with the country in an official state of energy emergency. Fighting in the east of Ukraine has halted coal production in many mines andhasblocked transport lines to power stations. On the upside,BMIunderstands Ukraine has managed to make payments for gas in March and May 2015 and the negotiations for a long-term solution, mediated by theEU, are ongoing. Although Ukraine is increasing its generation of nuclear energy, we still forecast a decline in generation to 152.9TWh in 2015, down from 173.8TWh in 2013.

Longer term, both production and consumption will rise as the economy starts to recover and processes of integration with the EU bring about a partial liberalisation of the power sector and investment from abroad. This will create opportunities for investment in Ukraine's power sector. However, multiple barriers stand in the way of developing the sector, including corruption, vested interests and the fractious political environment, meaning that electricity production will fall far short of Ukraine's potential.

Key Trends And Developments

*The short-term outlook for Ukraine's coal-fired power sector is poor due to the ongoing conflict in Ukraine's main coal-producing regions in the east of the country. Around two-thirds of Ukraine's mines have ceased activity, forcing Ukraine to import coal to cover its needs.

* Gazprom received USD15mn as prepayment for March 2015 gas supplies. Ukraine made an upfront payment of USD30mn to Gazprom on May 13 to secure gas imports for the month, according to Naftogaz Ukrayiny. Naftogaz has wired a total of USD180mn for Russian gas supplies since the start of Q215, including the latest payment of USD30mn. Ukraine also managed to negotiate a discount on the natural gas supply until the end of Q215. However, a long-term agreement is yet to be reached. European Commission (EC) Vice-President Maros Sefcovic intends to close talks with Ukraine and Russia by Q315 to ensure the security of gas supply for next winter and beyond.

*As a result of these pressures, the national energy company Ukrenergo has imposed rolling blackouts and suspended exports to Belarus and Russian-occupied Crimea. Ukraine has also started to import electricity from Russia, but this is vulnerable to political conditions, specifically Russia's demand that Ukraine continues supplying electricity to the rebel-held Donbass region.

*In line with an agreement with the IMF, prices increased by 40% in March 2015 and will continue rising until 2017. This follows a sharp increase in wholesale prices in 2014 (from UAH730 to UAH830 per MWh) due to problems in domestic generation.

*Consumption is falling as swathes of south-eastern Ukraine are left without electricity following damage to power lines and stations. As of February 2015, around 175,000 residents were without electricity, in places such as Luhansk, Donetsk and Debaltseve. Instability has also compromised the steel industry, the single main consumer of electricity, exacerbating an existing dip in global demand for steel, which has already been lowering production.

Ukraine and the EU are continuing to work on the implementation of a trade deal that will bring Ukraine more closely under the ambit of Brussels and could accelerate a liberalisation of the power sector, including deregulation, privatisation and the introduction of a market-based pricing system.